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How to win the search position game

By Chris Lien

Sometimes being in the third or fourth paid search position is actually more effective — and a lot cheaper — than winning the top spot. Find out when it pays and when it doesn’t.
When marketers buy keywords, they often get caught up in the idea that their ads have to come first on the page — and they pay a premium for that placement. But first position isn’t always the best. Sometimes, position three or four will actually convert at the same or higher rate than position one, and at a fraction of the cost.

First position keywords can cost two or more times what a third position one does, and in some cases, it makes sense to pay that premium (for example, when you’re more interested in brand building than conversion, you’ll want to make sure your brand comes out on top). For campaigns for which conversion and profitability are also factors, position three or four can be better.

But how do you know which keywords should be in position three or four, and which are worth the splurge for the top position? How can you measure and test campaigns to find out which should be top-tier and which should be third-tier? How can you maneuver within Google, MSN and Yahoo to get the positions you want? Here are some tips that should help you win the position game.

Focus on what each click is worth, not on what position it should be in
In general, if a purchase conversion is worth $10, and one out of 10 people purchases, you should pay about $1 per click. You should offer that maximum price to Google (or another search engine) for the specified keyword.

After you launch campaigns, continue to test them for conversion metrics and adjust your top bid accordingly. Many marketers think that if the clickthrough rate is higher, the keyword should be more expensive. But you should determine the value of a keyword based on conversion rate, not clickthrough rate, because you only pay by the click.

Heads or tails?
Head keywords are generic terms that people search while browsing or doing product research, such as “mp3 player.” Head keywords often benefit from being in first position, because they capture a lot of “browsers” who just click on the first link and may be exposed to your site for the first time. These people may not buy now, but they’ll connect with your brand.

Tail keywords are often best in third or fourth position. These keywords are specific and appeal to committed buyers, such as “black ipod nano 8gb.” People searching for these keywords are usually more ready to buy, so they’ll look at — and even click through — several ads to find the best deal, even if that deal appears in a link halfway down the page.

The upshot? Head terms get much more volume and are often more expensive to boot, so to justify your investment you may need to measure carefully which visitors return to your website.

Set a top position
This is a tool on Google you can use to hold your keywords down in the rankings, even if you are bidding enough to be #1. It’s always better to figure out first how much your keywords are worth to your bottom line, and then find out where that places you. But this tool can be useful if you find that position #1 gets a lot of poor quality traffic that never converts.

Focus on the dirty dozen
Most marketers spend the majority of their budgets on a few top keywords, usually about a dozen, which are high volume and have a strong conversion rate. Focus on fixing the position of these keywords first, because correctly placing these top keywords will have the biggest impact on total revenues. Let the others fall where they will according to their conversion rates as described above.

Turn off Google Search and Content Networks
If you don’t opt out of Google’s search partners, like AOL and Ask.com, your position numbers will reflect a blend of your positions across all of those properties. To get an accurate picture of where your keywords are positioned on Google itself, turn off the additional distributions. You can always turn them back on after you finish your measurement.

Turn off Google Content Network. Ditto as above
To figure out what your keywords’ true positions are, focus on Google itself, not your position across all its content partners, such as New York Times, MySpace and About.com.

Work weekends
Some keywords perform stronger on the weekend, such as “gardening” or “beach wear,” for example. Set up automatic bid increases for these terms to boost your position solely on the weekends. (Google supports this at the campaign level; MSN supports this at the Ad Group level; and Yahoo doesn’t support it right now.) Remember: These boosts should be based on changes in conversion rates, not click volume. Look for the pattern before you set the boosts.

Pony up for brand and “executive” keywords
If you’re Coca-Cola, you just have to pay whatever it costs to have “Coca-Cola” be in the top position — that’s crucial for your brand. Plus you can use your company name in those brand-term ads, and other advertisers cannot (call the support team at the search engine if you see any violations of this). Likewise, if your CMO tells you the company needs to be in top position for certain keywords, like “digital camera” or “PC” to build your brand in those categories, then just pay what it costs to be in the top spot (and pull the cost from the branding budget!).